Optibase (OBAS)

As
of 2008, Israeli companies are generally subject to a corporate income tax rate of 27%.
The income tax rate for Israeli companies is scheduled to be reduced to 26% by 2009 and
25% by 2010. We were granted Approved Enterprise status under the Law for the
Encouragement of Capital Investment, 1959 which allow us to enjoy two alternative tax
benefits. Under one of the alternatives, a companys undistributed income derived
from an Approved Enterprise will be exempt from corporate tax for a period of between two
and ten years from the first year of taxable income, depending on the geographic location
of the Approved Enterprise within Israel, and the company will be eligible for a reduced
tax rate of 10%-25% for the remainder of the benefits period depending on the level of
foreign investment. See also Item 10.E. Taxation under the heading
Israeli Taxation- Tax benefits under the Law for the Encouragement of Capital
Investment, 1959 below. The period during which we are entitled to receive these
benefits is limited to seven or ten years from the first year that taxable income is
generated, 12 years from commencement of production or within 14 years from the date of
approval of the Approved Enterprise status.A recent amendment to the Law, which
has been officially published effective as of April 1, 2005 has changed certain provisions
of the Law. An eligible investment program under the amendment will qualify for benefits
as a Privileged Enterprise (rather than the previous terminology of Approved Enterprise).
See also Item 10.E. Taxation under the heading Israeli Taxation- Tax
benefits under the Law for the Encouragement of Capital Investment, 1959 below.

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We
have final tax assessments through the tax year 2005. On December 27, 2007 and on May 28,
2008, we received from the Israeli Tax Authorities a Tax Assessment (the
Assessment) based upon best judgment for the years 2002-2003 and
2004-2005 respectively. On January 13, 2009 we signed a settlement agreement with the ITA
according to which a final tax obligation of $73,000 was paid for the final tax
assessments for the years 2002-2005.

As
of December 31, 2008, we had approximately $50.3million of net operating loss
carry-forwards for Israeli tax purposes which we will have to utilize before we can make
use of the tax benefits arising from our Approved Enterprise status. These net
operating loss carry-forwards have no expiration date.

As
of 2007, Israeli companies are generally subject to a corporate income tax rate
of 29%. The income tax rate for Israeli companies is scheduled to be gradually
reduced to 25% by 2010. We were granted Approved Enterprise status under the
Law for the Encouragement of Capital Investment, 1959 which allow us to enjoy
two alternative tax benefits. Under one of the alternatives, a companys
undistributed income derived from an Approved Enterprise will be exempt from corporate tax for a period of between two and ten
years from the first year of taxable income, depending on the geographic
location of the Approved Enterprise within Israel, and the company will be
eligible for a reduced tax rate of 10%-25% for the remainder of the benefits
period depending on the level of foreign investment. See also Item 10.E.
Taxation under the heading Israeli Taxation- Tax benefits under the Law for
the Encouragement of Capital Investment, 1959 below. The period during which
we are entitled to receive these benefits is limited to seven or ten years from
the first year that taxable income is
generated, 12 years from commencement of production or within 14 years from the
date of approval of the Approved Enterprise status. A recent amendment to the
Law, which has been officially published effective as of April 1, 2005 has
changed certain provisions of the Law. An eligible investment program under the
amendment will qualify for benefits as a Privileged Enterprise (rather than the
previous terminology of Approved Enterprise). See also Item 10.E. Taxation
under the heading Israeli Taxation- Tax benefits under the Law for the
Encouragement of Capital Investment, 1959 below.

We
have final tax assessments through the tax year 2001. On December 27, 2007, we
received from the Israeli Tax Authorities a Tax Assessment (the Assessment)
based upon best judgment for the years 2002-2003. According to the
Assessment, the Tax Authorities reduced our losses for tax purposes, for those
years and imposed a tax obligation of approximately NIS 1.000 million
(approximately $285,000). We have reservations with respect to various
parts of such Assessment and filed an appeal with the Israeli Tax Authorities.
On May 28, 2008, we received from the Israeli Tax Authorities a Tax Assessment (the
Second Assessment) based upon best judgment for the years 2004-2005. In the
Second Assessment, the Tax Authorities reduced our losses for tax purposes, for
those years and imposed a tax obligation of approximately NIS 669,000
(approximately $190,000). We have reservations with respect to various parts of
the Second Assessment and intend to file an appeal with the Israeli Tax
Authorities.

As
of December 31, 2007, we had approximately $42 million of net operating loss
carry-forwards for Israeli tax purposes which we will have to utilize before we
can make use of the tax benefits arising from our Approved Enterprise status.
These net operating loss carry-forwards have no expiration date.

As
of 2006, Israeli companies are generally subject to a corporate income tax rate of 31%.
The income tax rate for Israeli companies is scheduled to be gradually reduced to 25% by
2010. We were granted Approved Enterprise status under the Law for the Encouragement of
Capital Investment, 1959 which allow us to enjoy two alternative tax benefits. Under one
of the alternatives, a companys undistributed income derived from an Approved
Enterprise will be exempt from corporate tax for a period of between two and ten years
from the first year of taxable income, depending on the geographic location of the
Approved Enterprise within Israel, and the company will be eligible for a reduced tax rate
of 10%-25% for the remainder of the benefits period depending on the level of foreign
investment. See also Item 10E. Taxation under the heading Israeli
Taxation-Law for the Encouragement of Capital Investment, 1959 below. The period
during which we are entitled to receive these benefits is limited to seven or ten years
from the first year that taxable income is generated, 12 years from commencement of
production or within 14 years from the date of approval of the Approved Enterprise
status.A recent amendment to the Law, which has been officially published
effective as of April 1, 2005 has changed certain provisions of the Law. An eligible
investment program under the amendment will qualify for benefits as a Privileged
Enterprise (rather than the previous terminology of Approved Enterprise). See also Item
10E. Taxation under the heading Israeli Taxation-Law for the
Encouragement of Capital Investment, 1959 below.

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As
of December 31, 2006, we had approximately $32.9 million of net operating loss
carry-forwards for Israeli tax purposes which we will have to utilize before we can make
use of the tax benefits arising from our Approved Enterprise status. These net
operating loss carry-forwards have no expiration date

As
of 2005, Israeli companies are generally subject to a corporate income tax rate of 34%.
The income tax rate for Israeli companies is scheduled to be gradually reduced to 25% by
2010. We were granted Approved Enterprise status under the Law for the Encouragement of
Capital Investment, 1959 which allow us to enjoy two alternative tax benefits. Under the
one of the alternatives, a companys undistributed income derived from an Approved
Enterprise will be exempt from companies tax for a period of between two and ten years
from the first year of taxable income, depending on the geographic location of the
Approved Enterprise within Israel, and the company will be eligible for a reduced tax rate
of 10%-25% for the remainder of the benefits period depending on the level of foreign
investment. See also Item 10E. Taxation under the heading Israeli
Taxation-Law for the Encouragement of Capital Investment, 1959 below. The period
during which we are entitled to receive these benefits is limited to seven or ten years,
from the first year that taxable income is generated, 12 years from commencement of
production or within 14 years from the date of approval of the Approved Enterprise
status.A recent amendment to the Law, which has been officially published
effective as of April 1, 2005 has changed certain provisions of the Law. An eligible
investment program under the amendment will qualify for benefits as a Privileged
Enterprise (rather than the previous terminology of Approved Enterprise). See also Item
10E. Taxation under the heading Israeli Taxation-Law for the
Encouragement of Capital Investment, 1959 below.

As
of December 31, 2005, we had approximately $24.0 million of net operating loss
carry-forwards for Israeli tax purposes which we will have to utilize before we can make
use of the tax benefits arising from our Approved Enterprise status. These net
operating loss carry-forwards have no expiration date

The
following table sets forth, for the years ended December 31, 2003, 2004 and 2005
statements of operations data as percentages of our revenues: